Whatever happened to saving your money? What ever happened to living within your means? Nowadays, consumerism really has taken over and done a number on many families. It is no secret that the economy isn’t so great right now for many people. That’s why I believe that saving money need to make a comeback.
Ok, so don’t look at me like I have tentacles coming out of the side of my head (now that’s a visual). Let me explain the how and the why.
The How/The Why
Pay yourself, not just your debtors. I find that a lot of people get their paychecks, cash the entire thing and don’t even want to put the spare change into their savings account. When you have the cash in hand, you will spend it. If it is difficult for you do this on your own due to financial discipline, get a deduction automatically set up to go to a savings account with minimal access to you. If it is hard to get to, the normal reaction would hopefully be to do without or find another asset source for money. Touching the savings account should be a last resort and something that you have to think about, which slows you down.
You should be putting away money for a rainy day especially in these uncertain times with gas and food prices on the rise. No job is secure, no matter what you are told. Eventually, if not already, you ideally should have about 6-9 months of your salary saved in liquid or semi liquid products to offset the likelihood of having immediate trouble if you were to be out of work due to an injury/long term for you or a family member. Also, in the case that you were laid off or lost your job, you could buy a little bit of time trying to find another job without a severe financial interruption.
Keeping cash available can protect your credit indirectly. You learn to live on less than what you actually make. If you are not spending your entire disposable income on expenses and saving some of it, that means that you are living within your means and budgeting your personal finances. Taking this approach will force you to pay all your bills (hopefully on-time) and still help build your financial security because of the discipline that is required to save.
Having higher cash balances will also reduce the likelihood of getting fees on your bank accounts as well because of the law of averages. If you are carrying a higher balance, it should be difficult for you to be charged a fee due to insufficient funds, overdrafts, minimum balance requirements, etc.
On a final note, my Dad told me a few years ago: “You can’t be an investor if you don’t save anything.” That stuck with me and that is one of my mantras that I try to share with the people I interact with in my everyday experiences.
I knew that this question would come up and I am glad that it was asked it. The quick answer is YES, ABSOLUTELY. It is almost always better to pay cash than to take a loan for obvious reasons. However, some savvy investors can use credit to leverage their hard earned cash assets in order have their money make an additional source of income for them. Putting out all cash for the purchase of certain items are not always the wisest decision when you consider some alternatives.
Some people have ways of investing in avenues that give their cash more bang for the buck and also helps them reduce fees and they find more value in that rather than being totally debt free. Of course this is not the solution to everyone’s financial picture. It would be naive of me to make that statement. However, managing debt is great skill to develop because if you are not filthy rich, it becomes more and more difficult to acquire things without using credit. It is my opinion that a home loan or home equity loan is usually a good type of debt to have if it is a must have. There are usually tax advantages to be had on the interest that you pay on these loans on an annual basis around the tax season. Cash secured loans also afford the opportunity to get great rates of interest because you are lending cash to the bank instantly. In doing so, they can offer a very low rate of interest and as you pay the loan back, the money becomes available to you after each payment. What I am saying is that the rates of interest on these kinds of loans are normally very low in comparison credit cards and other unsecured loans with high interest and high fees. All of this analysis assumes having great credit or good credit. This is only one side of the story.
Here is the other side. At this point, assuming that you have gotten a great rate of interest on a secured loan, you can now take the cash you have available and tie it up into investment vehicles that can hopefully beat that interest rate that you are paying on the loan. The net interest margin profit between the loan and the investment gives you another source of income. Investments can be done in a variety of ways. Some people invest in stocks, bonds, mutual funds, & CDs. Others invest in rental properties, commercial buildings, and other real estate ventures. However, all an investment does, at the end of the day, is to give you rate of return on your principal deposit. It could be 1%, 5%, 8%, 20%. There is always risk with doing this and that is why there are so many people who dedicate their professional lives to its analysis, forecasts, and proliferation of the news surrounding it.
So, let’s look at the situation again. Now you have your regular job that gives you a paycheck and a financial portfolio that gives you an interest income benefit and sometimes a tax advantage also. Of course you have pay taxes on all of these things which can help you get ahead or still leave you at where you started. It all depends on the situation. However, if you calculate precisely what your tax basis is, you can make a great estimate of what your new net worth would be with the loans and investments versus just paying cash for everything all the time, you might be surprised.
Again, this kind of personal finance isn’t for everyone, but I find it fascinating when someone is successful doing this. I’ve been able to really learn a lot from my experiences as well as the experiences of others. I encourage everyone to learn a bit more about the world of finance. I’m glad that I decided to leave engineering alone in college and learn about the financial world. I’m better suited for finance than engineering for sure.
Walk good everyone and leave your feedback if you would like to.
I had a great question posed to me given my line of work and I thought that I would share my thoughts. The question was: When applying for a loan, what does the bank look for?
Well, anytime you are looking to take a loan, you have to take into consideration the following information for yourself:
How much can you afford? How long do you want to pay it back? What is the interest rate? What are the fees?
Normally, the best likely situation would be a secured loan (car, home, boat, cash) rather than an unsecured loan (like a credit card or a personal loan). Secured loans will normally yield a lower interest rate unlike the unsecured kind.
What financial institutions that extend credit to people need to do is to prove the creditworthiness of the borrower. They find this out by your credit history (FICO score), your income (ability to pay back the loan from paystubs and income verification), and your current debt/income ratio (the percentage of total monthly debt you have vs how much gross monthly income you bring home). There may be other special factors that can be considered, but these are the basics.
All in all, loans are something that people need to take care of obligations, however, you just have to be careful and not overextend yourself with debt.
In recent weeks, I have been having some trouble posting with the frequency I once showed. As such, I have made it a point to jot down anything of substance as soon as it blesses me with a sense of clarity. I thought that I would share a quote that came to me after answering this thought provoking question from one of my best friends:
“If vulnerabilities make me fragile, why let myself be vulnerable?”
To this, I answered with the following: Being vulnerable isn’t always bad. Vulnerabilities are inevitable. It is part of the human experience where perfection is the golden idea, however, it is unattainable. Being human is beautiful and difficult at the same time.
“Your strength is not best demonstrated from denying that you are vulnerable…Your strength comes from being bold despite your vulnerability.” - Aurie
I hope this blesses someone. Remember that you are blessed to be a blessing.
“My Name is Jevon!” is a documentary created to go into the world of one autistic young man, Jevon White, who looks at the world in a different way. A low-functioning autistic 17 year old, Jevon does not have the luxury of what we take for granted, such as intelligent speech, normal social interactions and close knit relationships. Jevon was followed over a period of time to watch his daily reactions with his parents and family friends. “My Name is Jevon!” speaks about his development from his earlier years to now in the form of photographs and interviews with his parents, his school community and peers. Autistic individuals/children are clearly misunderstood and go through different challenges; however, they are human beings and should be treated as such. (Apologies for the quality of the piece, it needs to be done in proper format for better viewing. Thank you for your understanding).
I thought that this was interesting to share with you all.
I visited a blog of someone who has commented on mine before, I found this pretty cool program. It gives you a typing test and then based on your skills, it will record how fast you can type in one minute. Although, there are many factors to calculating your ability to type at a particular speed, I believe that there is some value to this. For some jobs, it is important to be able to type at a particular speed level. If for no other reason than having fun with it, I am always up for a challenge. According to the program, I type 59 wpm. I know that I am a slow typer in comparison to professionals. If you are like me, you probably learned to type consistently because of instant messengers and other chat programs. I can probably go faster if I really sit down and concentrate more than I did and also if I put a little bit of practice into it. Try it out if you would like by clicking on the link below that says 59 words and let me know your results in my comment section of this post.
On an even lighter note, click here for a funny picture storyboard that I was able to find.
I know it’s been a while since I’ve posted, but I have been a bit busy with some very important things. I will certainly keep the posts coming as my time permits.
I’ve been having so much trouble for a while trying to take video with my Sony Cybershot and convert it into a small enough file to upload onto my youtube page. Thanks to Money Mike, the guy that everyone can’t help but love, I was able to figure out why my windows movie maker application would not work. When the story come to bump, I find out that Internet Explorer 7 was the guilty party. In any case, needless to say, I now use Mozilla Firefox and I’ve been liking it so far. I was messing around with the video and the transitions and music, etc.
This video is just me and money mike messin around in the driveway living out the NBA dream that never was. I needed to get into shape. This was summer 2007 after a day at the beach….done at the same time of this post.
I can’t wait till it warms up so I can do this again.
So I was checking my myspace home page and I glanced at one of my friend’s status messages and I thought to myself: Wow! I have to steal this one. Now, I got alot of people really thinking deeply about this including the fam. Tell me what you think whether you’ve heard this before or not.
“Real Eyes….Realize….Real Lies” - an unknown mental magician
In other news, I’m noticing I am saying banker type things more often than I care to pay attention to (a.k.a. read the title of this post). Is it a sign that I need to get away for a while?
So I was watching family guy while eating dinner and I almost fell out of my chair when I saw this clip. This was redone on youtube, so just bear with the music in the beginning and the end. I also must apologize for the quality of the video. With all that said…enjoy. This is soo funny!!
You all remember watching those annoying tv commercials, usually a car commercial about ridiculous financing and no money down. Well, this is certainly a spoof on all that is shady! Enjoy.
